May 8 (UPI) -- Extending an agreement with OPEC to balance the market through managed production declines is in Russia's interest, the country's energy minister said Monday.
"Russia is in solidarity with the efforts of the partners aimed at rebalancing the market and believes that the joint initiative to stabilize the world oil market is currently effective," Energy Minister Alexander Novak was quoted as saying by Russian news agency Sputnik International.
Russia said it's meeting its commitments to an agreement coordinated by the Organization of Petroleum Exporting Countries and implemented in January. The largest non-member contributor to the agreement, Russian crude oil production is down 300,000 barrels per day from October. The agreement was coordinated in November.
Average Russian crude oil production for the first quarter of the year stands at around 11.2 million barrels per day, 130,000 barrels per day lower than the fourth quarter, but 120,000 barrels per day higher year-over-year.
Russia's contribution is vital to the arrangement, though the Kremlin offered mixed support for the agreement last year after publicly stating in 2015 that coordinating with OPEC was an unsavory proposal. Novak, however, said the Kremlin's position was firm.
"We are discussing various options and believe that an extension for a longer period will help speeding up the return of markets to a healthier state," he said.
Russian Economic Development Minister Maxim Oreshkin said recently that the resiliency of U.S. shale to lower crude oil prices was putting a ceiling over the price of oil, which has declined steadily in recent sessions because of a lopsided market and other economic factors. That could make a strong case for parties to the OPEC agreement to extend the terms of the deal.
Cailin Birch, a commodities analyst at the Economist Intelligence Unit said, told UPI in emailed comments that most parties to the agreement are in favor of extending the arrangement through the end of the year. That could re-establish a floor price under crude oil of $50 per barrel, but could also be something of a mixed blessing given the resiliency in U.S. shale oil production to weak market conditions.
"We expect the global oil market to register a small deficit in 2017, but that the effects of this will be short lived as more production enters the market in 2018, keeping prices low by historic standards," Birch said.